The Texas Housing Machine

The call

Texas builds the most houses in America and earns the least on each one. That is not a failure of the market — it is the market working.

Texas has spent a decade legislating, financing and engineering its housing supply to be elastic — quick and cheap to add more of, so demand arrives as extra houses rather than as higher prices. Elastic supply is a transfer to the buyer. It is why the durable profit in this chain sits almost nowhere along the assembly line, and almost entirely in position — a specific piece of ground, a specific permit, a specific district.

Consensus reads Texas housing through the listed homebuilder. Volume, permits, migration, share gains: the state issued 140,579 single-family permits in 2025, more than any other, 15.4% of the national total and 1.66 times the national rate per resident (Census Building Permits Survey, state annual 2025; Census Vintage 2025 estimates). From that it is a short step to the conclusion that the builders with the biggest Texas footprints are where the money is.

The filings say otherwise where Texas can actually be isolated. PulteGroup reports Texas as its own segment: in 2025 that segment earned $162.2 million of pre-tax income on $1,829.5 million of closing segment assets — 8.9%, the lowest closing-asset yield of its six homebuilding segments, against 35.4% in the Northeast and 34.5% in the Midwest (PulteGroup 10-K FY2025, segment operating data and segment asset tables). Century Communities also reports Texas separately: $31.7 million of pre-tax income on $891.8 million of closing segment assets, 3.6%, again the lowest of its five (Century Communities 10-K FY2025, results of operations by segment). KB Home's Central segment, Colorado and Texas, posted a 16.6% housing gross margin — its worst — and absorbed $20.4 million of the company's $32.1 million of inventory-related charges (KB Home 10-K FY2025, segment statements of operations).

Two builders isolate Texas; Texas ranks last in both. That is a measured result, not a universal one. D.R. Horton's Texas-heavy South Central region is the counterexample: it earned a 14.0% FY2025 pre-tax margin, essentially the best of its six regions, after internalising part of its lot supply through Forestar (D.R. Horton 10-K FY2025, regional results). Some builders do earn in Texas. Volume alone does not decide which ones.

Lennar's South Central region — Arkansas, Kansas, Missouri, Oklahoma and Texas, with Texas the dominant share — delivered 23,416 homes in fiscal 2025 against 18,844 the year before, a 24% increase. Gross margin on those homes fell from 23.1% to 17.3%. Sales incentives ran at 19.7% of revenue, the highest of any Lennar region, versus 10.1% in the West. Regional operating earnings dropped from $753.7 million to $493.1 million (Lennar 10-K FY2025, selected financial and operational data by region). The volume was purchased, not earned.

Meanwhile, in the same state and the same year, the developer of Bridgeland in Cypress, Texas earned $100.4 million of segment earnings before tax, up 29% (Howard Hughes Holdings 10-K FY2025, MPC segment EBT by community). The builders selling houses on Bridgeland's lots were cutting price. The party selling the lots was raising it.

§The thesis, stated plainly

Durable profit in the Texas housing machine does not attach to a layer. It attaches to a position. The house, the option contract (a deposit that buys the right, not the obligation, to take lots later), the land bank (outside capital that owns the ground and carries it in the meantime), the truss, the mortgage — each is a competitively supplied service, priced at something close to its cost of capital, and each is replicable by anyone with money. What is not replicable is a specific parcel of already-entitled ground (land that already carries the public permissions needed to build on it) inside an existing city; a 10,000-acre contiguous assemblage in the path of jobs with its own utility district (a self-taxing public body that finances the pipes) and thirty years of amenity investment; a permitted quarry or cement terminal inside the freight radius of Houston, close enough that trucking the rock does not eat the price; a water right (the state's permission to pump or divert, granted separately from the dirt) and a wastewater permit. Those things earn a rent. Everything else earns a wage. A wage is what competition pays for doing a job well: honest money, earned again every year, available from the next capable firm with capital. A rent is what an owner collects for holding something that firm cannot obtain at any price.

The corollary is uncomfortable for the bulls. Texas keeps narrowing selected constraints that create land rent: SB 15 limits lot-size rules on qualifying unplatted tracts in large municipalities; SB 840 opens qualifying commercial zones to mixed-use and multifamily housing; HB 24 changes zoning-protest procedure; SB 2038 created an ETJ-release route (a way for landowners to exit a city's outer planning ring). None abolishes municipal discretion everywhere, and water, drainage and utility rules remain. Together they make marginal housing permission less scarce precisely where greenfield supply (building outward on open land) is already elastic. Texas is unusually good at converting demand into units — and therefore unusually hard to underwrite on entitlement scarcity alone.

Sources: Census BPS state annual 2025; Census Vintage 2025 population estimates; Texas Bond Review Board 2025 Local Government Annual Report; PulteGroup FY2025 10-K. Permit share computed as 140,579 ÷ 911,903.

§Five conclusions a Texas specialist would argue with

1. 1Texas's 2025 housing legislation is bearish for Texas land, not bullish for Texas homebuilding. The consensus read of SB 15, SB 840 and HB 24 is "pro-supply, pro-builder." Supply elasticity destroys land rent before it helps builder margin — and the builders' own segment returns in Texas were already the worst in their portfolios before the bills took effect on 1 September 2025. Estimated
2. 2The Municipal Utility District statute is a scale subsidy, and nobody prices it as one. 30 TAC §293.47 exempts trunk lines serving 1,000+ acres and drainage serving 2,000+ acres from the 30% developer contribution, and §293.50 removes the two-year cap on interest reimbursement at the same thresholds. A 12,000-acre master-planned community (one owner's decades-long build-out of an entire place, not a single subdivision) is reimbursed for infrastructure — and for the carry on it — that a 200-acre subdivision must part-fund itself. The master-planned franchise is partly statutory. Known Known
3. 3Land banking is a hybrid credit-and-land business, not a free option on housing. Millrose Properties earned 6.9% on average equity in 2025 and pays its external manager 1.25% of tangible assets a year; by the first quarter of 2026 it disclosed a 10.7% weighted average yield on the $2.7bn deployed outside the Lennar programme. The cash flow is credit-like; the downside collateral is land. Future option pricing can reset competitively, while fixed-rate debt does not automatically reprice. The sign of a rate rally therefore depends on asset and liability duration that Millrose does not disclose. Estimated
4. 4"Land-light" explains nothing about returns. The phrase means optioning lots instead of owning them, so the ground sits on somebody else's balance sheet. Green Brick owns 75.8% of its lots and earned 18.3% pre-tax on assets; Meritage owns 72.0% and earned 7.9%; Lennar owns 2% and earned 7.4%. Ownership share is not the variable. Where the ground sits is. Known Known
5. 5Immigration policy is a single lever that cuts Texas housing demand and Texas housing labour at the same time. Net international migration supplied 167,475 of Texas's 391,243 population gain in 2025 and is falling; immigrants are 25.5% of the US construction workforce and one in three trades craftsmen; 61% of Texas's construction workforce is Hispanic. The sell-side models these as two independent risks. They are one correlated shock. Estimated

Part I

How the machine works — from cow pasture to closing table

A Texas subdivision comes into existence in a fixed sequence, and a reader fluent in capital markets but not in dirt needs that picture — physical and financial — before any of the returns above mean anything. The sequence is not complicated. Its financing is where the interesting things happen.

1. 01
   Raw land

   Agricultural ground in the growth path, typically bought under a long option. Statewide rural land averaged $5,246/acre in Q1 2026.
2. 02
   Entitlement

   Plat approvalOfficial sign-off and county recording of the plat — the surveyed map that carves a tract into numbered lots, streets, easements and drainage. Until the plat is approved and filed, the individual lots do not legally exist, and nobody can sell or build on them., zoning if inside a city, and — in Texas, uniquely — creation of a utility district. Weakest step in the chain in Texas.
3. 03
   Horizontal developmentEverything done to the ground before a house goes up: earthmoving, drainage, water and sewer mains, streets, power and telecom. It is called horizontal to distinguish it from vertical work, which is the house itself. The two are usually done by different companies with different economics.

   Grading, detentionPonds and basins that catch stormwater and let it out slowly, so a new subdivision does not push its runoff onto the neighbours. In flat, flood-prone Texas it is one of the largest and least negotiable line items in site work., water, sewer, roads, dry utilitiesElectricity, gas and telecom — the ones that do not carry water. The trade splits site utilities into wet (water, sewer, storm drainage) and dry, because they are permitted, financed and reimbursed differently.. Front-funded by the developer, largely reimbursed later by district bonds.
4. 04
   Finished lotA single building plot with the streets, water, sewer and drainage already in and the plat recorded — ready for a slab to be poured. It is the unit of trade between the developer and the builder, and the price of it is where most of this report's arguments meet.

   Sold to a builder outright, in bulk, or on a rolling takedownA contract under which the builder buys the lots in scheduled batches over months or years rather than all at once, paying as it goes. It keeps the builder's capital free and leaves the developer holding the unsold ground.. Forestar's average was $108,400 per lot in FY2025.
5. 05
   Vertical buildConstruction of the house itself, from the slab up. In Texas it is done almost entirely by subcontracted trades working for the builder, which is why a homebuilder is better understood as an assembler and marketer than as a manufacturer.

   Slab to keys in roughly four to six months, executed almost entirely by subcontracted trades.
6. 06
   Sale & finance

   Closed through the builder's captiveOwned by the builder and serving mainly its own buyers, rather than competing for business in the open market. A captive mortgage or title company lets the builder control the closing, and lets it push a discount through the loan instead of through the sticker price. mortgage and title arms; the rate buydown is the price cut, routed through the loan.

1.1The Municipal Utility District: Texas's answer to who pays for the pipe

Everywhere else in America, a developer funds subdivision infrastructure out of equity and debt and recovers it in the lot price. In Texas, the developer builds the infrastructure, hands it to a district, and the district issues bonds to buy it back. The Texas Commission on Environmental Quality's rule sets the split: the developer must contribute "not less than 30% of the construction costs for all water, wastewater, drainage, and recreational facilities," with the balance reimbursable from bond proceeds (30 TAC §293.47; adopted rule text at TCEQ Chapter 293 rule adoption). A companion rule lets the developer recover the interest it carried: reimbursement for up to two years after final payment on approved construction estimates, extendable to five in defined cases — and, tellingly, with no time limitation at all on accrued interest for wastewater treatment serving 2,000 or more acres and water or sewer lines serving 1,000 or more acres (30 TAC §293.50).

The economics live in the exemptions. Treatment plants and water-supply facilities, regional trunk linesThe big arterial water and sewer mains that carry flow for a whole area, as opposed to the small collector lines that run down each street. Only a developer with enough acreage needs one — which is precisely why the rule that exempts them rewards size., lines serving 1,000 acres or more, and drainage and flood-control works serving 2,000 acres or more are carved out of the 30% requirement. A district whose debt is 10% or less of certified assessed valuation, or which achieves an investment-grade rating on its own credit, can be exempted from the contribution entirely.

That rule does very different work for a 12,000-acre master-planned community than for a 200-acre infill subdivision. The large developer's qualifying spine infrastructure — regional trunk mains, large drainage works and treatment capacity — can fall on the exempt or reimbursable side of the line; the small developer's local collector lines ordinarily do not. The benefit is not a blanket thirty cents on every infrastructure dollar. It is facility-specific, acreage-tested and subject to district and TCEQ bond eligibility. The interest rule compounds the same threshold: the 1,000- and 2,000-acre tests that can remove the contribution requirement also remove the ordinary two-year cap on interest reimbursement. Two rules, one acreage test, both capable of running in the incumbent's favour. That is a statutory scale advantage, not a universal subsidy.

The bill lands on the homeowner. Harris County MUD 501 levied $0.5972 per $100 of value for 2025 — $0.39 contract tax, $0.145 debt service, $0.0622 maintenance — on top of county, city, school, hospital and college rates (HCMUD 501 tax information). Harris County MUD 208 levied $0.36, unchanged from 2024 (HCMUD 208, 2025 tax rate set). Those are two examples, not a statewide range. The homeowner repays reimbursed infrastructure over time through the district levy; the developer converts an eligible capital expenditure into a receivable from a public body. Katy West MUD's $15.75 million Series 2025 preliminary official statement makes the mechanism explicit: bond proceeds reimburse developers for water, sewer and drainage facilities, and the bonds are secured by an unlimited ad valoremLatin for "according to value" — a tax levied as a percentage of a property's appraised worth. "Unlimited" means the district promises to set whatever rate is needed to service the bonds, with no cap, which is what makes the paper sellable. tax (Katy West MUD, Series 2025 preliminary official statement, 26 June 2025). That is the trade.

Source: Texas Bond Review Board, 2025 Local Government Annual Report, Tables 1.4, 1.5, 2.1 and Chapter 3. School-district growth computed from Table 2.1 ($97,570.8m → $148,268.9m).

1.2Entitlement, or the near-absence of it

Entitlement is the industry's word for permission. It is the stack of public approvals — a recorded plat, zoning where a city has any, a district to serve the ground with water and drainage — that turns a field into land somebody is legally allowed to put houses on. Where those approvals are hard to win, the permission itself becomes the scarce thing, and scarce things carry a price.

Texas has no county zoning. Outside city limits, a landowner faces plat and subdivision rules, floodplain and on-site sewage rules, and little else. Inside the ETJ, cities once had leverage; Senate Bill 2038, effective 1 September 2023, created a petition-and-election process by which owners can unilaterally remove land from a city's ETJ, and limited ETJ expansion after 1 January 2023 to areas whose owners request inclusion. The Greater Houston Builders Association's read is the practical one: cities must now offer carrots (GHBA, ETJ opt-out legislation now in effect).

The 89th Legislature went further in 2025, but not everywhere and not on every parcel. Senate Bill 15 took effect 1 September 2025 and limits lot-size rules only in municipalities above 150,000 population that sit in counties above 300,000, and only on unplatted, single-family-zoned tracts of at least five acres; airport, military and other exclusions remain (enrolled SB 15, §§211.052–.055). Senate Bill 840 requires those same large municipalities to allow qualifying mixed-use and multifamily residential uses in office, commercial, retail and warehouse zones, subject to industrial, airport and infrastructure exceptions (enrolled SB 840, ch. 218). House Bill 24 changes municipal zoning-protest and notice procedure (enrolled HB 24).

Three bills, one direction: make it harder for an incumbent to stop a new house. For a housing economist that is good news. That is elastic supply, and its consequence is unforgiving: when buyers arrive in a place where houses are easy to permit and quick to build, the market answers with more houses rather than higher prices, and the money the buyer would have paid a scarce owner never becomes anyone's profit. For anyone underwriting Texas land on the theory that entitlement is a scarce right, it is the opposite of good news. The right is being handed out.

1.3Builder economics, spec versus build-to-order, and the buydown

Texas is overwhelmingly a speculative-inventory market: houses started before a buyer exists, then sold from standing stock. D.R. Horton held 38,000 homes in inventory at 30 June 2026, of which roughly 23,300 were unsold and about 7,600 of those complete (D.R. Horton 10-Q, Q3 FY2026, land and lot position note). Standing inventory in a rate-sensitive market is a wasting asset, and the tool for moving it is the buydown. Lennar's disclosure — $58,600 of incentive per home delivered in South Central, 19.7% of revenue — is the same fact in a different costume.

Some of what the builder gives away comes back through its own mortgage arm. D.R. Horton's financial services segment produced $841.2 million of revenue and $278.7 million of pre-tax income in fiscal 2025, a 33.1% pre-tax margin (D.R. Horton 10-K FY2025, financial services results and Note G). Margin is not return on capital. DHI Mortgage carried $2.57 billion of loans held for sale at 30 September, funded in part by $1.1 billion on a committed repurchase facility and $304.8 million on an uncommitted facility; it originated $23.7 billion and sold $23.5 billion during the year. The business is high-turnover and warehouse-fundedFinanced by short-term bank lines that hold newly written mortgages for the few weeks between closing the loan and selling it on. The borrowed money is repaid out of the sale, so the lender needs little permanent capital — but it does need the line, and it pays interest on it., not capital-free, and D.R. Horton does not disclose segment assets or ROIC. KB Home's financial services generated $34.98 million of pre-tax income against $519.2 million from homebuilding. The captive arm is a useful distribution and incentive-routing advantage. Its capital return is Not Verified.

The captive does not fund a thirty-year mortgage. In D.R. Horton's case, 71% of FY2025 mortgages were sold directly to Fannie Mae, Freddie Mac or into Ginnie Mae securities. The federal takeoutThe standing willingness of the government-backed mortgage agencies to buy conforming loans. Because that buyer is always there, the originator never has to hold the loan — it writes it, sells it, and recycles the same capital again. is where the lasting liquidity comes from; the builder earns origination and gain-on-saleThe profit made in selling a freshly written loan for slightly more than it cost to make. It is a fee-like, per-transaction margin that depends on volume, not on holding the mortgage or collecting its interest. economics around it. The Fannie Mae July 2026 Housing Forecast puts 2026 single-family mortgage originations at $2.298 trillion, of which $1.446 trillion is purchase and $0.852 trillion refinance. Texas is unusually exposed to the entry-buyer channel: the HUD/FHA FY2025 MMI Fund report shows Texas at 12.02% of FHA forward endorsementsLoans the Federal Housing Administration has formally agreed to insure — in effect, the count of mortgages it has taken on. "Forward" separates ordinary purchase and refinance lending from reverse mortgages, which the agency reports on its own., the largest state share, while first-time buyers made up more than 83% of FHA forward purchase endorsements. The agency balance sheet makes the loan available; the captive mortgage makes the builder's house clear.

1.4Property tax, the HOA, and the real monthly number

Texas has no personal income tax and funds schools and local services through ad valorem property tax. Voters raised the general school-district homestead exemptionA slice of a primary residence's appraised value that is simply not taxed. Raising it cuts every qualifying owner's school-tax bill without touching the rate, which is why it reads as a permanent reduction in the cost of owning rather than a one-off rebate. from $100,000 to $140,000 with Proposition 13 on 4 November 2025, applied retroactively to the 2025 tax year, and lifted the additional senior exemption to $60,000 with Proposition 11. That reduces the recurring cost of ownership, which is a genuine demand support — and it is the only lever in this chain that puts money in the buyer's pocket without taking it from a producer.

The buyer's affordability arithmetic is the sum of four things, and only one of them is the house. On a $306,600 home — D.R. Horton's average South Central closing price in fiscal 2025 — at 90% loan-to-value and 6.5%, principal and interest run $1,744 a month. Add roughly $562 at a 2.2% total tax rate, or $715 inside a MUD at 2.8%. Add roughly $340 a month for homeowner insurance, if the widely reported Texas average of about $4,100 a year at $300,000 of dwelling coverage holds — a figure this report could not verify against a Texas Department of Insurance filing this session and therefore carries as indicative only. Add an HOA. The mortgage is barely 60% of the payment, and the two fastest-growing components — district taxes and insurance — are the two the builder does not control.

Part II

The value-capture spine — walking one lot from pasture to closing

Follow a single Fort Bend County acre from cattle to keys and watch where the dollar stops being a pass-through cost and becomes profit that survives the next competitor. Most of the chain is pass-through. Two nodes are not.

2.1What each layer actually gets paid, per unit

The per-unit numbers sit beside each other below. They are disclosed figures, not a modelled waterfall; the scopes differ and the table says so.

Howard Hughes discloses builder price participation — $52.3 million in 2025 — as revenue "earned when a developer that acquired land from us develops and sells a home to an end user at a price higher than a predetermined breakpoint." The community developer holds a contractual call on the homebuilder's upside. When a Bridgeland house sells above the strike, the ground beneath it takes a cut. There is no equivalent instrument running the other way.

Part III

Return on capital, applied to the names we like and the names we cut

Gross margin describes pricing, not durability. What a business earns on the capital it must tie up is the test — and the only honest way to use it is to apply the same arithmetic to the layer being praised and the layer being dismissed. So: pre-tax income divided by the average of opening and closing total assets, taken from the same annual filing for every name, plus net income on average equity as a second lens. No adjustments, no add-backs, no exclusions. Where the method flatters or penalises a business, the note says so.

3.1The land-light debate is a red herring

The industry's governing idea since 2022 has been that optioning lots rather than owning them raises returns by shrinking the denominator. Optioning works like this: the builder pays a deposit for the right, not the obligation, to buy finished lots later at a set price, and someone else — a land bank, a land seller, a joint venture — owns the ground and carries it in the meantime. The land never touches the builder's balance sheet, so the assets it divides its profit by are smaller. If the market turns, the builder walks and loses the deposit. That is a plausible story, and the disclosures do not support it.

Green Brick is the clean experiment. It builds in Dallas–Fort Worth, Austin and Houston, plus Atlanta and Florida's Treasure Coast, and it says of itself that it self-develops "in infill and infill-adjacent submarkets" and that owning the majority of its land "gives us a competitive" position on lot supply (Green Brick 10-K FY2025, Item 1). It holds 37,023 owned lots against 11,805 under contract. It earned 18.3% pre-tax on average assets in a year when every Texas builder's segment returns fell.

Green Brick's homebuilding gross margin fell 330 basis points in 2025, and a business harvesting land bought before 2021 will show a high return until the basis runs out. That is not a criticism of the thesis; it is the thesis. Durable value in Texas land is a stock of position being harvested, not a spread being earned on new capital. The same caveat applies with more force to Howard Hughes, whose remaining Bridgeland residential acreage carries a projected cash gross marginThe share of a land sale left after the cash actually spent on that ground — its purchase price and its development cost — is deducted. On land assembled decades ago, that cost is tiny in today's money, so the margin says more about when the acre was bought than about how well it is being sold. of 89% and The Woodlands 96% — margins that exist because the land was assembled decades ago, not because the operator is doing something a competitor cannot copy today.

3.2Texas, isolated

Company-level returns blend geographies. Two builders report Texas as a standalone segment with its own asset base. That gives the only true Texas-versus-elsewhere return comparison in the listed universe.

Set beside those, D.R. Horton's Texas-dominated South Central region — Arkansas, Oklahoma and Texas — earned a 14.0% pre-tax margin on $6,899.3 million of fiscal-2025 revenue, essentially tied for the best of its six regions. The difference is not geography. D.R. Horton owns 62% of Forestar and holds a right of first offerA contractual right to be shown an asset, and given the chance to buy it, before anyone else may bid. It is weaker than a right to match a rival's price, but in a market where lots are scarce it is enough to keep a competitor from ever seeing the good ones. on up to 100% of the lots from projects it sources, buying 11,751 of Forestar's 14,240 fiscal-2025 lot sales. It has internalised the one hand-off in the chain where a margin can still be taken.

Part IV

Cycle and structure — separating the rate trade from the demographic one

Every argument about Texas housing runs aground on the same confusion. The migration story is structural and slow. The profit story is cyclical and fast. Between 2021 and 2025 they moved together, and it became possible to believe they were the same thing. They have now separated, and the separation is the most useful piece of information available.

4.1The demand pillar is weakening, and it is doing so from an unexpected direction

The headline "Texas grew most" is true and beside the point. A state adding 391,000 people is still adding people. But the composition has changed from high-income domestic movers — the buyers of $400,000 move-up homes — to natural increase and international arrivals, who form households later and at lower price points. That is consistent with what the builders report: Lennar's South Central average sales price fell to $238,000, D.R. Horton's South Central to $306,600, PulteGroup's Texas segment to $385,000. Volume is holding at the bottom of the price ladder and thinning above it.

4.2Decomposing the profit: how much was cycle?

Take D.R. Horton, the most Texas-exposed of the majors, as the clean case. Fiscal 2023 pre-tax income was $6,314.7 million; fiscal 2025 was $4,739.9 million. That is a 24.9% fall in profit against a 3.4% fall in revenue, from $35,460.4 million to $34,250.4 million. Homes closed in the nine months to 30 June 2026 were essentially flat year on year at 61,287. Neither volume nor migration composition was constant across the full interval, so the filing cannot identify a causal “cycle share.” It can support a narrower accounting question: how much of the profit decline came through revenue scale, and how much came through the margin earned on that revenue?

Sources: Census BPS state annual 2025 and Vintage 2025 estimates; Lennar, PulteGroup, Century Communities and KB Home FY2025 10-Ks; Census/HUD New Residential Sales, June 2026 (CB26-121, 24 July 2026); the D.R. Horton incentive figure of 10.9% of gross sales price attributed to management on the Q3 FY2026 call is Tier 3 and was not verified against a transcript or filing this session — see "not verified".

4.3Interest-rate sensitivity, layer by layer

Capital cost does not hit this chain evenly, and the differences are the whole game.

Part V

The chokepoint test — what a well-funded entrant genuinely cannot buy

Assume an entrant with unlimited capital and a five-year horizon walks into Houston or Dallas tomorrow. For each supposed barrier, ask what stops them. Most of the answers are "nothing, it just costs money," and a barrier that money clears is a cost, not a moat.

The aggregates row hides a Texas-specific subtlety that is easy to get backwards. Martin Marietta's Southwest Division crushed stone carried an average selling price of $15.70 a ton in the pricing used for its 2025 reserve estimate, against $21.79 in the East Division — Texas limestone is abundant and, inland, cheap. The scarcity is not statewide. It is concentrated on the Gulf Coast, where, as Vulcan puts it, there are "limited supplies of locally available, high-quality aggregates," served instead by rail, barge and ship. Houston — the largest new-home market in the United States by permits — imports its rock. The scarce asset there is not the quarry but the rail-served yard and marine terminal, and the market has already put a price on that: Martin Marietta sold its South Texas cement business, the Hunter plant at New Braunfels, its distribution terminals and twenty ready-mix plants to CRH for $2.1 billion in cash in February 2024.

Part VI

Master-planned communities — the one durable node, and the reason it is finite

The master-planned community is the closest thing Texas has to infill land: a position that cannot be recreated where it sits, earning a margin the builders inside it cannot compete away — and, crucially, one that is being consumed rather than compounded.

A master-planned community is one owner's version of a town. Thousands of contiguous acres are bought ahead of the growth and cheap, laid out to a single design, given their own water and drainage district, schools, parks and trails, then released to homebuilders parcel by parcel over decades. The developer does not build the houses. It builds the place, and sells the ground to the firms that do.

Houston is the capital of this format. Of RCLCO's national top-50 best-selling master-planned communities at mid-2025, eleven were Houston-area: Sunterra in Katy fourth nationally with 543 first-half sales, Tamarron ninth with 510, Anniston eleventh with 476 in its first year, Bridgeland fourteenth with 438, then The Grand Prairie, Meridiana, Tavola, Lago Mar, Sienna, Elyson and Cypress Green. For the full year, Sunterra closed 1,024 new-home sales, Tamarron 974 (up 32%), Bridgeland 812.

Four things compound in these communities, and they only work together: acreage large enough to trip the MUD reimbursement exemptions; amenity and school investment funded out of that reimbursed infrastructure; a controlled release of lots to a curated builder roster, which stabilises price; and a contractual claim on the builders' own upside. Marketing has nothing to do with it.

6.1Builder price participation: the developer's call option on the builder

Howard Hughes discloses it plainly. Builder price participation is "earned when a developer that acquired land from us develops and sells a home to an end user at a price higher than a predetermined breakpoint. The excess over the breakpoint is shared between us and the developer at the time of closing on the sale of the home based on a previously agreed-upon percentage." It contributed $52.3 million of revenue in 2025.

That instrument rearranges the bargaining position. The builder takes the construction risk, the labour risk, the warranty liability and the standing-inventory carry. If the house sells for more than expected, the ground beneath it takes a share. If it sells for less, the builder eats it alone. In options language, the community developer is long a call it did not pay for, financed by selling the builder a lot. No comparable instrument runs the other way.

6.2The same operator, the same model, two states — and a three-to-one gap

Aggregate Howard Hughes' three Texas communities and they produced $118.1 million of 2025 segment EBT against Summerlin's $361.2 million alone. That is the clearest available measure of what elastic supply costs the owner of a Texas position, and it sits inside a single issuer's audited segment note — about as clean as this kind of comparison ever gets.

Still, the Texas number is going the right way while the builders' Texas numbers go the wrong way. Bridgeland's EBT rose 29% in 2025. PulteGroup's Texas segment pre-tax income fell 53%; Century's fell 45%. Same state, same year, same mortgage rate, same buyer. The developer raised price per acre from $591,000 to $669,000 while the builders on its lots raised incentives. That divergence — up 29% against down 45–53% — is the single most direct evidence in this report for where the bargaining power sits.

6.3Why "durable" does not mean "compounding"

The MPC franchise fails the test a growth investor would apply, and the report has to say so. Howard Hughes' consolidated pre-tax return on average assets in 2025 was 1.6%. Its MPC segment earned 13.9% on average segment assets — respectable, roughly D.R. Horton's number — but the segment is one of four, and the other three drag the whole to nearly nothing.

The margins are a harvest. A projected residential cash gross margin of 89% at Bridgeland and 96% at The Woodlands is what happens when land bought in the 1970s and 1990s is sold in the 2030s. It is not a spread earned on capital deployed today, and it cannot be scaled by adding capital — Howard Hughes' MPC segment capital expenditure in 2025 was $184 thousand. Teravalis, the company's attempt to start a new one from scratch in Phoenix, lost $3.2 million in 2025 and carries a projected sell-out date of 2086.

6.4The 2026 read-through, and a warning about the vehicle

The first quarter of 2026 extends the pattern rather than breaking it. Bridgeland's segment earnings before tax reached $34.7 million against $16.8 million a year earlier — up 107% — and the whole MPC segment earned $84.4 million against $63.3 million, up 33%, on higher residential land sales at Bridgeland (Howard Hughes 10-Q, quarter ended 31 March 2026, MPC segment EBT by community). Total residential land sales closed rose 23% to $85.6 million. Whatever is happening to Texas homebuilder margins is not happening to the ground under Cypress.

The same filing also makes the case for separating the asset from the security. In December 2025 Howard Hughes agreed to acquire 100% of Vantage Group Holdings, a specialty insurance and reinsurance company, for approximately $2.1 billion in cash, funded partly by an equity commitment from Pershing Square Holdings to purchase up to $1.0 billion of preferred stock, with closing expected in the second quarter of 2026. An investor buying Howard Hughes for Bridgeland is now buying, at the margin, an insurance underwriter with a master-planned community attached. The MPC franchise remains the most durable position in this report. The listed vehicle through which one can own it is drifting away from being a proxy for it. Known Known

The master-planned franchise is where the durable Texas rent is. It is also a wasting asset with a disclosed expiry date — Bridgeland 2032, The Woodlands 2031, The Woodlands Hills 2035. An investor buying it is buying a run-off book with an amenity budget, not a compounding machine. Price it accordingly.

Part VII

The Regional Opportunity Matrix — ranked, with the reasoning

Texas is not one market and the four big metros are not converging. Houston and Dallas–Fort Worth are still absorbing; Austin overbuilt and is working through it; San Antonio is the affordability market with slower recent payroll growth. Below them sits a set of secondaries where a single employer decision can move the permit count by half.

7.1Employment and regulation — the two columns the permit count misses

Part VIII

Labour, materials and the productivity question

A house in Texas is assembled by twenty-odd subcontracted trades from components made elsewhere. Nobody in that chain owns much. Only some of it converts Texas's sustained volume into a return that survives the cycle, and the split runs cleanly along one line: capital intensity.

8.1Labour: the correlated shock nobody is modelling

Texas employs more construction workers than any state, and 61% of that workforce is Hispanic — 803,000 workers, the largest such concentration in the country. Nationally, immigrants are 25.5% of the construction workforce, "a new historic high," and roughly one in three trades craftsmen comes from outside the United States. The Home Builders Institute puts required construction hiring at about 723,000 a year and quantifies the skilled-labour shortage's cost to homebuilding at $10.8 billion annually — $2.7 billion in carrying cost from longer build times and $8.1 billion from roughly 19,000 homes not built.

Set that beside Figure 7. Net international migration into Texas fell 52.8% in a single year, from 354,864 to 167,475, and the Census Bureau projects national net international migration falling from 1.3 million to roughly 321,000 by July 2026. The same policy lever that removes Texas's marginal homebuyer removes the marginal framer, roofer and drywall hanger.

Sell-side models treat immigration as a demand variable and labour cost as a supply variable, and shock them independently. They are the same variable. A correlated shock of this kind does not net out. It compresses volume and inflates unit cost at once — the one combination that destroys the operating leverage of a spec builder holding standing inventory. This is, in the report's judgement, the most under-priced risk in the Texas chain. Estimated

8.2Products and distribution: the lumber hangover, and the exception to it

Builders FirstSource is headquartered in Irving, Texas and is the largest supplier of structural building products and manufactured components to US homebuilders. Its 2025 results are a clean lesson in what commodity distribution earns when the commodity stops moving: net sales $15,190.6 million against $22,726.4 million in 2022; pre-tax income $512.4 million against $3,571.8 million; a 4.7% pre-tax return on average assets. The strategy statement is candid about where the company thinks the answer lies — organic growth in "higher margin value-added products, including trussesThe pre-built triangular timber frames that carry a roof or a floor, assembled flat in a factory and craned into place. They replace hours of skilled cutting on site with a delivery, which is why they matter to a builder short of trades., wall panels and millworkFinished wood components made off site — doors already hung in their frames, mouldings, staircases, cabinetry. Higher-margin than raw lumber because the work, not the material, is what the builder is paying for.," which it argues address "the growing demand for ways to build homes more efficiently, addressing labor constraints and rising costs."

That is the right instinct, and it points at the one genuine productivity lever in this industry. Off-site component manufacture — floor and roof trusses, wall panels, pre-hung doors, factory-glazed windows — converts scarce on-site trade hours into factory hours. It does not require a technological breakthrough and it is already happening. What it will not do is create a moat, because the panel plant is a shed with a saw and the customer is a builder with alternatives.

The capital-efficient exception is the installed trade. Installed Building Products earned $357.0 million of pre-tax income on $2,068.0 million of assets — a 17.3% pre-tax return on average assets and 37.5% on average equity, the highest return on equity anywhere in this study. Its Texas footprint is 17 facilities and 365,981 square feet. An installer holds no land and almost no inventory; its capital is branch working capital and acquired local route density. Its 2025 growth came from a 10.4% rise in commercial same-branch sales while residential declined. That is an excellent operating model, but not yet a durable rent: a well-funded entrant can buy branches and route density by the same acquisition process.

8.3Every material input, put through the same entrant test

8.4Heavy materials: where the permit does the work

Cement and aggregates are the one part of the supply chain where a government permission creates the scarcity. Martin Marietta says so explicitly: environmental, zoning and land-use regulations "will likely make it more difficult for the Company to expand its existing quarries or develop new quarry operations," and "future restrictions will likely make zoning and permitting more difficult, thereby potentially enhancing the value of the Company's existing mineral reserves." Vulcan makes the same point from the other side, noting that restrictions "curtail expansion in certain areas, but they also increase the value of our reserves at existing locations."

The physics enforce it. Aggregates have a high weight-to-price ratio; about 80% of Vulcan's shipments go by truck directly from the producing location to the customer, because "the cost of trucking materials long distances is prohibitive." A quarry is therefore a local monopoly with a radius, and no amount of capital creates one inside a metropolitan area that will not permit it.

The returns, however, do not look like a monopoly's. Vulcan earned 8.2% pre-tax on average assets in 2025, Martin Marietta 6.6%. Aggregates supplied 88% of Martin Marietta's total reportable segment gross profit; Vulcan's aggregates segment produced $1,964.8 million of gross profit on $4,985.4 million of freight-adjusted revenue, a 39.4% gross margin, with freight-adjusted price up 4.3% to $21.98 a ton and cash gross profit up to $11.33 a ton. High margins, low returns on capital — the signature of a business whose asset base is carried at acquisition cost for reserves that will last, in Martin Marietta's case, an average of 85 years at 2025 production rates. Eagle Materials, which runs a smaller and less acquisitive network with roughly 6% of US clinkerThe hard nodules that come out of a cement kiln and are ground into finished cement. Kiln capacity is the real bottleneck in the industry — grinding is easy, but building a new kiln takes years, permits and a limestone deposit underneath it. capacity and a 50%-owned cement joint venture in Texas, converts the same industry structure into 15.3% pre-tax on assets and 28.9% on equity.

Part IX

Government, regulation and the physical limits

Housing regulation does two things at once: it imposes cost, and it creates scarcity. The cost hurts producers; the scarcity protects them. Texas has spent three legislative sessions cutting the second while leaving the first largely intact.

Sources: enrolled SB 15, SB 840, HB 24 and SB 2038; Lennar and Millrose FY2025 10-Ks; TWDB Texas Water Fund; TWDB adopted 2027 State Water Plan Phase I, 23 July 2026. Proposition 4, 11 and 13 vote totals were not independently verified — see “not verified.”

9.1Which rules protect incumbents, and which are just cost

9.2The infrastructure ceiling: water first, power second

Water in Texas does not come with the dirt. The right to pump groundwater or to divert from a river is a separate permission, allocated administratively, and where every drop is already spoken for, no amount of money creates another one. A subdivision without a firm supply and a wastewater permit is a drawing.

The 2027 State Water Plan Phase I, adopted by the Texas Water Development Board on 23 July 2026, is the most consequential document in Texas real estate and almost nobody in housing reads it. It projects the state's population rising 53%, from 34.2 million in 2030 to 52.3 million in 2080, while existing supplies reliable in drought fall about 10%, from 15.5 million to nearly 14.0 million acre-feet, primarily from aquifer depletion. In drought-of-record conditions, potential shortage rises from 3.6 million acre-feet in 2030 to 5.8 million in 2080 before recommended strategies. Those strategies are not trivial: the plan says they would add almost 7.6 million acre-feet in 2080, at nearly $174 billion of capital cost in 2023 dollars, and leave 1.6 million acre-feet of unmet need. Without implementation, roughly one in four Texans in 2080 would have less than half the municipal supply required in a drought. The durable right is not “Texas will run out.” It is the permitted connection to a financed supply strategy in the corridor where population arrives.

Voters have responded with money rather than with restraint. Proposition 4, approved on 4 November 2025, dedicates up to $1 billion a year of existing sales-tax revenue to the Texas Water Fund beginning in 2027 and running to 2047 — up to $20 billion. The Board's own description of the mechanism confirms the $1 billion annual appropriation established by Senate Bill 7 of the 89th Legislature and the constitutional dedication put to voters as House Joint Resolution 7 (TWDB, Texas Water Fund). That is real, and it is also an admission. A state that needs $20 billion of dedicated capital to keep the taps running is a state where the water connection, not the acre, is the binding permission.

Power is the second-order squeeze, and it does not work the way one expects. Residential load is trivial; the issue is competition for the same corridors. ERCOT is tracking approximately 410 GW of large-load interconnection requests as of 26 March 2026, roughly 87% of them data centres — a queue that dwarfs the grid's historic peak demand. Whatever fraction of that queue is real, it means the flat, fibre-served, transmission-adjacent land on the edge of Dallas, San Antonio and the Permian now has a bidder who can pay far more per acre than a homebuilder can. Texas rural land in West Texas rose 13.5% year on year to a record $2,878 an acre, which TRERC attributes partly to "a spike in demand for land with potential for data centers."

Cheap land is what makes Texas housing cheap. A new, deep-pocketed buyer for the same land, competing for the same water and the same electrical interconnection, raises the floor under land cost without raising what a Texas homebuyer can pay — and the builder, who has no pricing power in this market, absorbs the difference. The data-centre boom is a margin risk to Texas homebuilding disguised as an economic-development story.

Part X

Capital-flow analysis — who is funding what, and at what return

The largest single pool of capital in this chain is not private. It is municipal debt, raised by districts, secured on homeowners' property taxes, and used to reimburse private developers for infrastructure they built first.

Part XI

Competitive scorecard — every named participant, graded

Grades answer one question: does this participant hold a position that lets it keep profit after a well-funded competitor arrives? Not who is cheap, not who grows fastest. Each grade is supported by land position, operating efficiency, return on capital, Texas exposure and capital allocation.

The distinction the scorecard must hold. High historical return on equity is not itself a barrier to entry. IBP's route density is bought branch by branch, and a funded consolidator can pursue the same strategy; leverage and acquisition prices explain the observed equity return but do not make it inaccessible. Eagle Materials is different: the limestone reserve, air permission and cement plant cannot be recreated inside the same freight radius by writing a larger cheque. IBP earns a neutral grade for a capital-efficient process. Eagle earns an advantaged grade for a protected position.

Part XII

Forward risks, assessed against the thesis rather than listed

The claim under test is that durable Texas value sits in assembled positions, permits and water rights, and not in the builder, the lot developer or the land bank. Each risk below is scored for what it does to that claim. Some of them strengthen it.

Sources: TWDB adopted 2027 State Water Plan Phase I; ERCOT large-load update, 1 April 2026; HBI Construction Labor Market Report Fall 2025; Freddie Mac PMMS 23 July 2026 and TRERC 2026 forecast; Green Brick, Howard Hughes and Harris County MUD disclosures as cited above.

AI and off-site construction is the risk this chain most routinely mis-specifies. The industry narrative is that automation will cut build cost and expand margins. The arithmetic says otherwise. Labour is a minority of the cost of a Texas house; land, financing, permits, district taxes and materials are the rest. Halving on-site labour hours on a $238,000 Lennar South Central home would not change who captures the profit — in an elastic-supply market, a cost reduction available to every builder is competed into the price within a cycle. Off-site component manufacture is real and worth doing. It is a cost-of-goods improvement in a market with no pricing power, which is to say a transfer to the buyer. Consensus Assumption contested.

Part XIII

The strongest case against this report — and the specific evidence that would settle it

Before dismissing the builder-centric consensus, it deserves its best hearing. Here it is, argued to persuade.

The case: Public builders bought 66% of all US finished lots in the third quarter of 2024, up from a 25% share of new-home closings in 2005 and 37% in 2019. That is not a cyclical share gain; it is a structural consolidation of an industry that was fragmented for a century, and it is happening because scale now confers three durable things a small builder cannot buy. First, access to lots: a developer with 2,000 lots to sell wants one counterparty who will take them all, and only a public builder can. Second, cost of capital: D.R. Horton, PulteGroup and Lennar fund inventory at investment-grade spreads while private builders pay bank rates, and in a rate-sensitive business that gap is the whole margin. Third — decisive, and new — the captive mortgage arm, which lets a public builder deliver a rate buydown at cost and convert its balance sheet into a demand-creation tool no private competitor can match. D.R. Horton's financial services segment earned a 33.1% pre-tax margin doing exactly this.

And Texas is where that compounds. The state permits more single-family homes than any other, 15.4% of the national total, at 1.66 times the national per-capita rate, in a regulatory environment that lets a builder actually deliver. Thin margins are the point: Texas is a volume business, and volume businesses are won by whoever has the lowest cost of capital and the most inventory turns. D.R. Horton's South Central region — Texas-dominated — earned a 14.0% pre-tax margin in fiscal 2025, its equal best. On that reading Texas is not the industry's problem; it is the arena in which the scale winners separate from everyone else, and the correct trade is to own the scale winners, not the dirt.

Where it breaks. The case is strong on share and weak on price. Every element of it — lot access, cost of capital, captive mortgage — describes an advantage over private builders, not an advantage over the buyer. And the evidence is that the buyer is capturing it. Lennar's South Central deliveries grew 24% while its gross margin fell 580 basis points and regional operating earnings fell 35%. That is the signature of share bought with price, and in an elastic-supply market that is what share always costs. The capital-cost advantage is real and it is being competed away between the four or five firms that all have it: PulteGroup, Lennar, D.R. Horton, KB Home and Century all have investment-grade-adjacent funding and all posted deteriorating Texas returns in the same year.

The one part of the bull case that survives contact with the evidence is D.R. Horton's South Central margin — and the reason it survives is not scale. It is that D.R. Horton owns 62% of a lot developer and holds a right of first offer on up to 100% of the lots from projects it sources. Which is this report's thesis, wearing a builder's uniform.

Part XIV

Leading indicators — what moves first, and where to read it

Housing turns are legible in advance if you watch the right series in the right order. Land and lot metrics lead; permits and starts follow; closings and revenue are history by the time they print.

Evidence register

The source spine, dated and tiered

Tier 1 = issuer filings, regulator and standards publications, primary statistical datasets. Tier 2 = reputable trade, wire or research publications. Tier 3 = single-source, aggregated or estimated, used only where flagged. Where a single filing supplied facts from several distinct sections, the sections are named. The amended claims and all load-bearing sources were reopened on 29 July 2026; unchanged background entries were retained from the finished report's evidence register and link-checked.

AIssuer filings — homebuilders (Tier 1)

1. D.R. Horton, Form 10-Q, quarter ended 30 June 2026 (filed July 2026) — MD&A overview (homes closed 23,983, gross margin 20.7%, incentive commentary); homes closed and home sales revenue by region (South Central 6,660 homes, $1,967.1m); homebuilding results by reporting region; land and lot position note (126,600 owned / 441,900 controlled / 568,500 total, $27.5bn remaining purchase price, $2.5bn deposits, 41,000 Forestar lots, 38,000 homes in inventory, 23,300 unsold, 7,600 completed).
2. D.R. Horton, Form 10-K, FY ended 30 September 2025 (filed 19 Nov 2025) — Item 1 Business (126 markets, 36 states, 62% of Forestar, Texas market list); homebuilding results by reporting region (South Central revenue $6,899.3m, pre-tax income $964.6m, 14.0%); financial services (revenue $841.2m, pre-tax income $278.7m, 33.1% margin); consolidated statements of operations and balance sheets.
3. Lennar, Form 10-K, FY ended 30 November 2025 (filed 28 Jan 2026) — Item 1 Business (98% of homesites optioned; land banks finance horizontal development into takedown prices; 1,708 communities; 5,000 completed unsold homes); Millrose spin-off note ($5.6bn of land, ~87,000 homesites, $1.0bn cash, $584m of option deposits); selected financial and operational data by region (South Central gross margin 17.3% vs 23.1%, operating earnings $493.1m vs $753.7m); deliveries and sales-incentive tables (South Central 23,416 homes, $238,000 ASP, $58,600 incentive, 19.7% of revenues); land-sale margin footnote (15,500 homesites abandoned, $23.1m deposit write-offs).
4. Lennar, Form 10-Q, quarter ended 31 May 2026 (filed 29 June 2026) — opened and reviewed for post-year-end corroboration of the land-light disclosures; no figure in this report is drawn solely from it.
5. PulteGroup, Form 10-K, FY2025 (filed 4 Feb 2026) — MD&A (home sale gross margin 26.3% vs 28.9%; homes in production 15,464); controlled lots table (Texas 16,220 owned / 19,162 optioned / 35,382; total 101,104 / 133,528 / 234,632; 43% owned; $10.0bn remaining option purchase price); operating data by segment (Texas revenue $1,675,539k, pre-tax income $162,179k, 4,352 closings, $385k ASP, 17% cancellation rate, $24,967k land charges); segment total assets note (Texas $1,829,532k; total $18,048,423k); consolidated statements of operations (income before income taxes $2,911,321k).
6. PulteGroup, Form 10-Q, quarter ended 30 June 2026 (filed 22 July 2026) — opened for currency of the segment structure; no figure in this report is drawn solely from it.
7. Century Communities, Form 10-K, FY2025 (filed 29 Jan 2026) — Item 1 (five reportable segments including Texas); results of operations by segment (Texas revenue $580,626k, income before tax $31,730k, 1,986 deliveries, $292.3k ASP); total assets by segment (Texas $891,763k, total $4,459,895k); selling communities and absorption tables.
8. KB Home, Form 10-K, FY ended 30 November 2025 (filed 23 Jan 2026) — Item 1 (Texas markets: Austin, Dallas, Fort Worth, Houston, San Antonio); Item 1A (concentration in California, Florida, Nevada and Texas); segment statements of operations (Central housing revenue $1,176,854k, gross margin 16.6%, pre-tax income $73,504k, inventory-related charges $20,407k of $32,051k); lots owned and controlled (64,612 vs 76,703; 24,596 lots abandoned).
9. Meritage Homes, Form 10-K, FY2025 (filed 13 Feb 2026) — Item 1 (twelve states; Central segment = Texas and Tennessee; 55,861 owned lots, 21,764 optioned; $1.3bn option purchase price, $161.5m deposits); home closing revenue by region (Central $1,835,691k, −8.9%, 5,264 homes, $348.7k ASP); cancellation rates; impairment note (Central real-estate impairments $5,697k, land held for sale $1,442k); consolidated statements (earnings before income taxes $584,600k).
10. Toll Brothers, Form 10-K, FY ended 31 October 2025 (filed 19 Dec 2025) — Item 1 (Dallas, Houston, Austin and San Antonio markets; approximately 57% of home sites optioned); segment definitions (South region = Florida, South Carolina, Texas); consolidated statements (income before income taxes $1,791,371k).
11. Taylor Morrison Home Corporation, Form 10-K, FY2025 (filed 18 Feb 2026) — Item 1 (Texas among twelve states of operation); land option and land-banking disclosures; consolidated statements (income before income taxes $1,042,043k).
12. Green Brick Partners, Form 10-K, FY2025 (filed 25 Feb 2026) — Item 1 (DFW, Austin, Houston, Atlanta, Treasure Coast; self-development in infill and infill-adjacent submarkets); lots owned and under contract (37,023 owned, 11,805 under contract, 75.8% owned); MD&A key metrics (homes delivered −3.1%, net new orders +3.1%, homebuilding gross margin −330bp).

BIssuer filings — land, communities and land banking (Tier 1)

13. Forestar Group, Form 10-K, FY ended 30 September 2025 (filed Nov 2025) — Item 1 (Arlington, Texas headquarters; D.R. Horton 62% ownership; Master Supply Agreement right of first offer on up to 100% of D.R. Horton-sourced lots; market list including Texas); MD&A (14,240 lots sold, 2,489 to non-D.R. Horton customers, average sales price per lot $108,400 vs $96,600; 99,800 lots owned and controlled; 22,800 under contract to D.R. Horton); consolidated statements (revenues $1,662.4m, income before income taxes $219.3m, total assets $3,137.0m).
14. Millrose Properties, Form 10-K, FY2025 (filed 2026) — Item 1 (Homesite Option Purchase Platform; purchases and develops land and sells finished homesites under option contracts; Kennedy Lewis as external manager); management fee (1.25% per annum of tangible assets, paid quarterly); counterparty concentration (Master Program Agreement option fees $484.8m, 85% of total; total Lennar option fees $501.5m, 88%; $2.862bn funded for land in 2025); Master Option and Master Construction Agreements (monthly option payments based on invested capital and an applicable rate; Lennar bears construction cost overruns; pause provisions; Applicable Rate Adjustment Right; compelled conveyance); Rausch definition (~25,000 homesites acquired); consolidated statements (revenues $600,461k, pre-tax income $400,373k, net income $379,864k, total assets $9,258,107k, equity $5,856,262k).
15. Howard Hughes Holdings, Form 10-K, FY2025 (filed 19 Feb 2026) — Item 1 (MPC segment description; Bridgeland and Summerlin RCLCO rankings; dependence on homebuilders to purchase superpad sites and lots); MPC portfolio table (Bridgeland 11,506 acres / 29,000 residents / 1,234 remaining residential acres / $662k estimated 2026 price per acre / sell-out 2032 / 89% projected cash margin; Summerlin 22,500 acres / 132,000 residents; The Woodlands 28,545 acres / 96% margin / sell-out 2031; The Woodlands Hills 2,055 acres / 87% / 2035; Teravalis 33,810 acres); MPC segment EBT (land sales $562,586k, cost of sales $188,704k, builder price participation $52,341k, total revenues $634,856k, segment EBT $476,102k, +36%); MPC segment EBT by community (Bridgeland $100,396k +29%; Summerlin $361,205k +38%; The Woodlands $7,380k; The Woodlands Hills $10,284k; Teravalis −$3,163k); acres sold and price per acre (Bridgeland 177.1 acres at $669,000, prior year 178.1 at $591,000; Summerlin 412.3 superpad acres at $970,000; The Woodlands Hills 28.4 acres at $479,000); segment assets note (MPC $3,487,301k, total $10,639,461k); consolidated statements (revenues $1,474,892k, income before taxes $161,459k).
16. Howard Hughes Holdings, Form 10-Q, quarter ended 31 March 2026 (filed 7 May 2026) — MD&A, MPC segment (segment EBT $84,376k vs $63,264k, +33%; Bridgeland $34,734k vs $16,792k, +107%; Summerlin $49,413k; The Woodlands $780k; The Woodlands Hills $2,900k; Teravalis −$3,451k; total residential land sales closed $85,633k, +23%); subsequent-events and acquisition note (definitive agreement of 18 December 2025 to acquire 100% of Vantage Group Holdings Ltd. for approximately $2.1bn cash, expected to close in Q2 2026, with a Pershing Square Holdings equity commitment of up to $1.0bn of preferred stock); financing activity ($500m 5.875% notes due 2032 and $500m 6.125% notes due 2034 issued February 2026 to redeem the $750m 5.375% notes due 2028).
17. Millrose Properties, "Reports First Quarter 2026 Financial Results," 6 May 2026 (issuer release, Tier 1) — total revenues $194.9m; net income $122.9m ($0.74 per share); AFFO $125.9m ($0.76); total invested capital $8.7bn; invested capital outside the Lennar Master Program Agreement $2.7bn at a 10.7% weighted average yield, up $365m in the quarter; 17 builder counterparties including 16 outside Lennar and the addition of a top-ten national builder; guidance of up to $2bn of net new capital deployment for full-year 2026.

CIssuer filings — building products, materials and rental (Tier 1)

17. Builders FirstSource, Form 10-K, FY2025 (filed 17 Feb 2026) — Item 1 (Irving, Texas headquarters; Houston vinyl-window plant); strategy (organic growth of value-added products — trusses, wall panels, millwork — addressing labour constraints); consolidated statements (net sales $15,190,638k; pre-tax income $512,382k vs $3,571,833k in 2022; total assets $11,237,530k).
18. Vulcan Materials, Form 10-K, FY2025 (filed 19 Feb 2026) — Item 1 (16.6bn tons of proven and probable reserves; "significant barriers to entry in many metropolitan markets due to stringent zoning and permitting regulations… they also increase the value of our reserves at existing locations"; top-ten states with Texas second; ~80% of shipments trucked from the producing location; limited Gulf Coast aggregate supply served by rail, barge and ship); Item 1A ("Construction aggregates have a high weight-to-price ratio, and transportation costs can quickly exceed the cost of the aggregates"); MD&A (freight-adjusted revenues $4,985.4m, shipments 226.8m tons, freight-adjusted price $21.98 (+4.3%), aggregates gross profit $1,964.8m, cash gross profit $11.33/ton); consolidated statements (pre-tax income $1,390.1m, total assets $16,700.4m).
19. Martin Marietta Materials, Form 10-K, FY2025 (filed 19 Feb 2026) — Item 1 (February 2024 sale of the South Texas cement business, the Hunter plant at New Braunfels, terminals and 20 ready-mix plants to CRH Americas Materials for $2.1bn cash; December 2024 West Texas bolt-on); Item 2 Properties (85-year average reserve life; "environmental, zoning and land use regulations will likely make it more difficult… thereby potentially enhancing the value of the Company's existing mineral reserves"; Southwest Division crushed-stone pricing $15.70/ton vs East $21.79); Item 1A (economic haul radius; "quality deposits… increasingly difficult to secure near growing markets due to competing land uses, zoning and land-use restrictions, and community opposition"); MD&A (aggregates 88% of total reportable segment gross profit); consolidated statements (pre-tax income $1,226m, total assets $18,711m).
20. Eagle Materials, Form 10-K, FY ended 31 March 2026 (filed 19 May 2026) — Item 1 (Dallas headquarters; 70+ facilities across 21 states; clinker capacity ~6.7m tons, about 6% of US total; 50%-owned joint venture including a Houston import terminal of up to 495,000 tons; top-ten revenue states including Texas); Item 2 (dedicated limestone quarries at each cement plant); MD&A (gross profit $652.5m, −3%); consolidated statements (revenue $2,308,658k, pre-tax income $541,976k, total assets $3,842,244k).
21. Installed Building Products, Form 10-K, FY2025 (filed 26 Feb 2026) — Item 2 Properties (17 Texas facilities, 365,981 sq ft); MD&A (net revenue $2,970.8m +1.0%, gross profit $1,009.3m +1.5%, commercial same-branch sales +10.4% offsetting residential declines); consolidated statements (pre-tax income $357.0m, total assets $2,068.0m, equity $709.9m).
22. QXO Insulation, LLC (formerly TopBuild Corp.), Form 10-K, FY2025 (filed 26 Feb 2026) — opened to establish the current corporate status of the largest US insulation installer; the registrant now files under the QXO Insulation name. No figure in this report is drawn from it.
23. Invitation Homes, Form 10-K, FY2025 (filed 19 Feb 2026) — Item 1 (Dallas, Texas headquarters; vertically integrated platform); Item 1A (Texas hurricane exposure); MD&A and portfolio information (net income $589,909k; 86,192 homes owned at 31 Dec 2025 vs 85,138); consolidated balance sheets (total assets $18,680,290k, equity $9,530,132k).
24. Weyerhaeuser, Form 10-K, FY2025 — timberlands, wood-products and commodity-price mechanics used for the lumber sublayer.
25. Nucor, Form 10-K, FY2025 — steel mills/products structure, construction end markets and commodity/trade exposure used for the steel sublayer.
26. Owens Corning, Form 10-K, FY2025 — roofing, insulation and doors portfolio used for the roofing/insulation sublayer.
27. Carrier Global, Form 10-K, FY2025 — HVAC equipment, channel and replacement-market disclosure used for the HVAC sublayer.
28. JELD-WEN, Form 10-K, FY2025 — windows/doors manufacturing, distribution and footprint disclosure.
29. Whirlpool, Form 10-K, FY2025 — appliance-category sales, retailer concentration and margin disclosure.
30. MasterBrand, Form 10-K, FY2025 — cabinet manufacturing, customer concentration and commodity/input disclosures.
31. Ferguson Enterprises, Form 10-K, FY2025 — plumbing/HVAC distribution, branch network and working-capital model.
32. SEC XBRL company-facts datasets, opened for arithmetic cross-checking of the income and balance-sheet items used in Figures 3, 4 and 8 — for example PulteGroup (CIK 0000822416), D.R. Horton (CIK 0000882184), Green Brick (CIK 0001373670) and Millrose (CIK 0002017206). These are the SEC's own structured extracts of the filings above and are used only to confirm figures already read in the documents.

DGovernment statistics and regulation (Tier 1)

25. Census Bureau, Building Permits Survey — state annual 2025 — Texas 140,579 1-unit permits; United States 911,903; Florida 111,173.
26. Census BPS — state annual 2024 — Texas 158,121; United States 981,911.
27. Census BPS — state annual 2023 (Texas 149,860), 2022 (154,793) and 2021 (179,620).
28. Census BPS — county annual 2025, the source for every metro permit figure in Figures 10 and 11.
29. Census BPS — county annual 2024 and county annual 2019, the comparison years.
30. Census Bureau, county population estimates, Vintage 2025 — Texas 31,709,821 at 1 July 2025; components of change 2022–2025; county populations for the metro aggregation.
31. Census Bureau, "U.S. Population Growth Slows Due to Historic Decline in Net International Migration," 27 January 2026 — national growth 1.8m (0.5%) to 341.8m; net international migration 2.7m → 1.3m (−53.8%), projected ~321,000 by July 2026; Texas 31,318,578 → 31,709,821, +391,243, +1.2%, net international 167,475.
32. Census Bureau and HUD, New Residential Sales, June 2026 (CB26-121), 24 July 2026 — new single-family sales 628,000 SAAR, −5.6% year on year; 485,000 homes for sale; 9.3 months' supply; median price $398,300; South region annual figures for 2024 and 2025.
33. Texas Bond Review Board, 2025 Local Government Annual Report — Table 2.1 (water districts' tax-supported debt $19,259.2m in FY2021 rising to $30,367.4m in FY2025; school districts $97,570.8m → $148,268.9m; total $174,454.2m → $257,022.7m); Table 1.5 (water-district new money $3,595.0m, $5,178.0m, $5,804.5m, $6,282.5m, $6,366.4m for FY2021–25; 1,098 issuers and 1,612 issuances in FY2025); Table 1.4 (84.4% of water-district tax-supported debt retired within twenty years); Chapter 3 (water districts 22.7%, $25.44bn, of local revenue debt).
34. 30 Texas Administrative Code §293.47 — "not less than 30% of the construction costs for all water, wastewater, drainage, and recreational facilities"; exemptions for treatment plants and water-supply facilities, regional trunk lines, lines serving 1,000+ acres, and drainage, levee and flood-control facilities serving 2,000+ acres; the debt-to-certified-assessed-valuation ≤10% and investment-grade-rating exemptions.
35. 30 Texas Administrative Code §293.50 — developer interest reimbursement up to two years after final payment, extendable to five in defined circumstances, with no time limitation for wastewater treatment serving 2,000+ acres or water and sewer lines serving 1,000+ acres; no reimbursement of interest on the developer's §293.47 share.
36. Texas Commission on Environmental Quality, Chapter 293 (Water Districts) rule adoption — the agency's own adopted text of the district bond and developer-participation framework.
37. Texas Legislature Online — SB 15, 89th Legislature Regular Session, "Relating to size and density requirements for residential lots in certain municipalities; authorizing a fee." Signed 20 June 2025; effective 1 September 2025.
38. Texas Legislature Online — SB 840 (89R), municipal regulation of mixed-use and multifamily projects and commercial-to-residential conversion. Signed 20 June 2025; effective 1 September 2025.
39. Texas Legislature Online — HB 24 (89R), "Relating to procedures for changes to a zoning regulation or district boundary." Signed 20 June 2025; effective 1 September 2025.
40. Texas Water Development Board, Texas Water Fund — created by Proposition 6 (November 2023); Senate Bill 7 of the 89th Legislature establishing a $1bn annual appropriation; House Joint Resolution 7 placing the sales-tax dedication on the November 2025 ballot.
41. Texas Water Development Board, 2027 State Water Plan — records Board adoption of the plan on 23 July 2026 and describes it as identifying thousands of strategies with projected costs and sponsors.
42. ERCOT, update to the Texas Senate Committee on Business & Commerce, 1 April 2026 (Pablo Vegas, President and CEO) — approximately 410 GW of large loads seeking interconnection as of 26 March 2026, about 87% data centres; 2,008 active generation interconnection requests totalling 453,562 MW as of 28 February 2026 (energy storage 177,642 MW, solar 162,927 MW, gas 60,715 MW, wind 47,793 MW); 271% growth in queued gas capacity since the 2023 Texas Energy Fund.
43. Harris County Municipal Utility District No. 501 — 2025 tax rate $0.5972 per $100 (contract tax $0.39, debt service $0.145, maintenance and operations $0.0622); services financed.
44. Harris County Municipal Utility District No. 208, "2025 Tax Rate Set" — $0.36 per $100, unchanged from 2024.
45. Freddie Mac, Primary Mortgage Market Survey, 23 July 2026 — 30-year fixed 6.58% (prior week 6.55%, year ago 6.74%); 15-year 5.96%.
46. Texas Water Development Board, 2027 State Water Plan Phase I (adopted 23 July 2026) — population 34.2m to 52.3m; existing drought-reliable supply 15.5m to nearly 14.0m acre-feet; potential shortage 3.6m to 5.8m before strategies; almost 7.6m of strategy supply and 1.6m of residual unmet need in 2080; nearly $174bn capital cost in 2023 dollars.
47. Katy West Municipal Utility District, Preliminary Official Statement, Unlimited Tax Bonds Series 2025 (26 June 2025) — $15.75m issue, developer-reimbursement use of proceeds and unlimited ad valorem tax security.
48. Harris County Municipal Utility District No. 493, Preliminary Official Statement, Unlimited Tax Road Bonds Series 2024 — issue-level EMMA disclosure retrieved in the AR-2 search; used as corroboration of the official-statement layer, not for a numerical verdict.
49. Texas Legislature, enrolled SB 15 (89R) — exact applicability to qualifying municipalities and unplatted five-acre single-family tracts, operative lot-size limits and exclusions.
50. Texas Legislature, enrolled SB 840 (89R) — exact large-municipality applicability, qualifying commercial-zone residential uses and infrastructure/industrial exceptions.
51. Texas Legislature, enrolled HB 24 (89R) — operative zoning-change procedure.
52. Texas Legislature, enrolled SB 2038 (88R) — operative ETJ-release provisions and limits.
53. BLS Economy at a Glance, Dallas–Fort Worth–Arlington — June 2026 total nonfarm payroll 4.363m, +1.3% year on year; industry changes.
54. BLS Economy at a Glance, Houston–Pasadena–The Woodlands — May 2026 total nonfarm payroll 3.508m, +0.6% year on year; construction +4.8%, mining/logging −3.7%.
55. BLS Economy at a Glance, Austin–Round Rock–San Marcos — June 2026 total nonfarm payroll 1.432m, +1.9% year on year; industry changes.
56. BLS Economy at a Glance, San Antonio–New Braunfels — June 2026 total nonfarm payroll 1.197m, +0.6% year on year; industry changes.
57. BLS Economy at a Glance, Sherman–Denison — June 2026 total nonfarm payroll 55,400, +1.7% year on year; manufacturing +3.6%, professional/business services +8.5%.
58. BLS metropolitan-area employment table — common monthly payroll source for the emerging secondaries.
59. Office of the Texas Governor, Texas Enterprise Fund — deal-closing grant mechanism and awarded-project list current through 30 June 2026, used as the dashboard’s corporate-expansion signal.
60. Texas Workforce Commission, WARN notices — advance plant-closing and mass-layoff notices, paired with expansion awards to avoid treating announcements as net job creation.
61. Fannie Mae, Housing Forecast, July 2026 — 2026 single-family mortgage originations forecast $2.298tn, purchase $1.446tn and refinance $0.852tn.
62. HUD/FHA, FY2025 Annual Report to Congress on the MMI Fund — Texas 12.02% of FY2025 forward endorsements; first-time buyers above 83% of forward purchase endorsements.
63. FHFA HPI Summary Tables, 2026Q1 — Texas purchase-only HPI −0.58% quarter on quarter and −1.63% year on year, rank 50.

EResearch institutes, trade and industry (Tier 2)

45. Texas Real Estate Research Center, Texas Housing Insight, July 2026 (published 23 July 2026, May 2026 data) — year-to-date single-family permits 61,396, −6.6%; months of inventory 5.3; statewide median price $340,000; 33,661 closed sales in May, +0.6%; metro commentary on Austin, DFW, Houston, San Antonio and Fort Worth.
46. TRERC, 2026 Texas Real Estate Forecast (15 January 2026) — 155,000 single-family permits forecast for 2026 (+1%); 349,000 home sales (+2.5%); median price +1.3% to about $334,000; 30-year mortgage rate 5.0%–5.6% at December 2026; population growth 0.7%–1.2%.
47. TRERC, Texas Rural Land Markets, First Quarter 2026 (26 May 2026; Lynn D. Krebs and Tian Su) — statewide $5,246 per acre, +6.02% year on year; dollar volume −2.52%; acres sold −8.06%; Gulf Coast–Brazos Bottom $11,698 (+9.83%); Austin–Waco–Hill Country $8,028 (+8.27%); Northeast Texas $8,960 (+0.98%); typical tract size −24.41% to 1,573 acres.
48. Home Builders Institute, Construction Labor Market Report, Fall 2025 — 8.3m payroll construction workers, 3.3m residential; ~723,000 required hires a year; skilled-labour shortage cost $10.8bn a year ($2.7bn carrying cost, $8.1bn from ~19,000 homes not built); immigrants 25.5% of the construction workforce, about one in three trades craftsmen; Texas construction workforce 61% Hispanic, 803,000 Hispanic workers.
49. Zonda, New Home Lot Supply Index, 1Q26 (published 11 May 2026) — national index 84.6, +31.6% year on year, "slightly undersupplied"; Austin significantly oversupplied, Dallas slightly oversupplied; total upcoming lots −2.2% year on year.
50. ResiClub Analytics, reporting John Burns Research and Consulting, 11 December 2024 — public builders purchased 66% of US finished lots in Q3 2024 (private builders 28%, build-to-rent 5%, investors 2%); public-builder share of new-home closings 25% in 2005, 37% in 2019, 51% in 2023.
51. Houston Agent Magazine, reporting RCLCO's Mid-2025 Sales Top 50, 29 July 2025 — Sunterra (Katy) 4th nationally with 543 sales; Tamarron (D.R. Horton) 9th with 510; Anniston (Friendswood Development) 11th with 476; Bridgeland 14th with 438; plus The Grand Prairie, Meridiana, Tavola, Lago Mar, Sienna, Elyson and Cypress Green.
52. Greater Houston Builders Association, "ETJ Opt-Out Legislation Now in Effect," 11 September 2023 — SB 2038 effective 1 September 2023; petition requiring 51% of residents or an election with at least 5% participation; exclusions near military bases, industrial districts and strategic partnership agreements.
53. Perry Homes, "Perry Homes Named to 2026 Builder 100 List," 8 May 2026 — No. 22 overall, No. 6 among privately owned builders; more than 70,000 homes built across nine Texas and Florida markets since 1967.

Not verified / not load-bearing

What this report could not confirm, and what it therefore does not conclude

The items below were encountered but not verified against a primary source opened for this amended report. None changes a grade or the central verdict; where an indicative item appears in the body, it is labelled. Each is listed so a reader can see exactly where the evidence stops.

• Texas homeowner insurance premiums and rate changes. A Texas average of about $4,100 a year at $300,000 of dwelling coverage, and Texas Department of Insurance rate growth of 18.7% in 2024 slowing to 4.3% in 2025, are widely reported. The Federal Reserve Bank of Dallas Southwest Economy article on the subject returned HTTP 403 to this session, and no TDI filing was opened. The affordability arithmetic in Part I flags the insurance component as indicative; no verdict rests on it.
• Proposition 4, 11 and 13 vote totals. The passage of all three on 4 November 2025 and the raising of the school homestead exemption to $140,000 (retroactive to tax year 2025) and the senior exemption to $60,000 are widely reported; the Ballotpedia page returned no content to this session and no Texas Secretary of State canvass was opened. No figure in this report depends on the margins.
• D.R. Horton's Q3 FY2026 incentive level of 10.9% of gross sales price. Attributed to management commentary in trade coverage; not confirmed against a transcript, press release or filing this session. It is quoted once, labelled Tier 3, and the incentive argument in this report rests instead on Lennar's audited 19.7% South Central disclosure.
• Green Brick's Q1 2026 gross margin of 28.9%. Reported by trade press and the reason Green Brick was added to the entity list mid-research. The company's FY2025 10-K was then opened and every Green Brick figure used here comes from it. The 28.9% quarterly figure is not used.
• Highland Homes' scale. Reported at roughly 3,800 closings and $2.4bn of revenue on 2024 data. No company primary was opened, the company does not file with the SEC, and Highland is characterised only as a large, long-tenured private Texas builder. It is not graded.
• Texas construction employment growth of 30,100 jobs (January 2025 to January 2026). Reported by an industry association; no BLS series was retrieved this session. The labour argument rests instead on the HBI report's verified workforce-composition figures.
• Metro-level finished-lot prices for Houston and Dallas. No source with a working deep link was located. The lot-price falsifier in Figure 13 therefore names Forestar's disclosed average sales price per lot as the observable proxy rather than a private lot-price index.
• Alternative metro permit counts. Trade sources variously describe Dallas–Fort Worth or Houston as the largest US new-home market, using permit series, construction-value series or proprietary field counts on differing geographic definitions. The ranking in Figures 10 and 11 is this report's own aggregation of Census county 1-unit permits to 2023 OMB metropolitan definitions, and is stated as such; it is not reconciled to any third-party metro count and readers comparing to one should expect differences.
• The count of Texas municipal utility districts. Figures above 750 water districts in the greater Houston region circulate widely; no TCEQ or Comptroller register was opened and no count is asserted in this report.
• Taylor Morrison's and Toll Brothers' Texas-specific returns. Neither discloses Texas as a segment. Both are graded neutral with an Estimated confidence tag precisely because the Texas verdict for them is inferred from peers rather than measured — the coverage floor was met on each company's own filing, but the Texas-level evidence does not exist in public disclosure.
• ERCOT's current system peak demand. The ERCOT presentation opened here gives the interconnection queue but not a peak-demand figure; the report therefore describes the queue as dwarfing historic peak demand without asserting a number.

This report is structural research on where profit concentrates in a value chain. It contains no valuations, price targets or investment recommendations, and the grades assigned are answers to a single stated question — durability of profit against a well-funded entrant — and nothing more.